Question 1

What is the future value of $600 deposited for 4 years earning an 11% interest rate annually?

Accepted Answer

A)  $792.90 
B)  $803.61 
C)  $899.23 
D)  $910.84

Question 2

What is the present value of a $600 payment in one year when the discount rate is 8%?

Accepted Answer

A)  $498.61 
B)  $525.87 
C)  $555.56 
D)  $575.09

Question 3

Solving for Time How many years will it take $100 to grow to $1,000 with an annual interest rate of 8 percent?

Accepted Answer

A)  9.00 years 
B)  10.00 years 
C)  29.92 years 
D)  33.35 years

Question 4

Moving Cash Flows What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

Accepted Answer

A)  $478.11 
B)  $980.00 
C)  $1,024.87 
D)  $1,364.10

Question 5

What annual rate of return is implied on a $5,000 loan taken next year when $7,700 must be repaid in year 8?

Accepted Answer

A)  6.36% 
B)  7.12% 
C)  8.54% 
D)  11.62%

Question 6

You are considering an investment that is expected to pay 5% in year 1, 7% in years 2 and 3 and 9% in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year?

Accepted Answer

A)  $2,501.42 
B)  $2,693.71 
C)  $2,713.04 
D)  $2,620.68

Question 7

Solving for Time How long will it take $4,000 to reach $4,500 when it grows at 8 percent per year?

Accepted Answer

A)  1.12 years 
B)  1.48 years 
C)  1.53 years 
D)  9.00 years

Question 8

One Year Future Value What is the future value of $700 deposited for one year earning 4% interest rate annually?

Accepted Answer

A)  $28 
B)  $700 
C)  $728 
D)  $1428

Question 9

Present Value What is the present value of a $200 payment made in 3 years when the discount rate is 8 percent?

Accepted Answer

A)  $150.00 
B)  $158.77 
C)  $251.94 
D)  $515.42

Question 10

When computing the rate of return from selling an investment, the number of years between the present and future cash flows is an important factor in determining:

Accepted Answer

A)  the annual rate earned. 
B)  the annual payments required. 
C)  whether the present value or the future value is a cash inflow. 
D)  whether the present value or the future value is a cash outflow.

Question 11

What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15% in years 6 through 13 and increase to 18% in the remaining years?

Accepted Answer

A)  $5,779.57 
B)  $5,9812.42 
C)  $6,005.71 
D)  $6,407.13

Question 12

Rule of 72 Approximately how many years does it take to double a $600 investment when interest rates are 6% per year?

Accepted Answer

A)  .08 years 
B)  8 years 
C)  8.33 years 
D)  12 years

Question 13

Solving for Rates What annual rate of return is earned on a $200 investment when it grows to $850 in ten years?

Accepted Answer

A)  3.25% 
B)  4.25% 
C)  13.47% 
D)  15.57%

Question 14

Solving for Rates What annual rate of return is implied on a $1,000 loan taken next year when $1,500 must be repaid in year 5?

Accepted Answer

A)  8.45% 
B)  10.00% 
C)  10.67% 
D)  12.50%

Question 15

Ten years ago, Hailey invested $1,000 and locked in a 9% annual rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in an 8% rate. How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

Accepted Answer

A)  $1,589.03 
B)  $2,846.56 
C)  $3,109.48 
D)  $2,109.73

Question 16

Discounting One Year What is the present value of a $250 payment in one year when the discount rate is 6 percent?

Accepted Answer

A)  $245.00 
B)  $235.85 
C)  $250.00 
D)  $265.00

Question 17

Moving Cash Flows What is the value in year 15 of a $600 cash flow made in year 3 when the interest rates are 4 percent?

Accepted Answer

A)  $374.76 
B)  $888.00 
C)  $960.62 
D)  $1,080.57

Question 18

Solving for Time How many years will it take $200 to grow to $250 with an annual interest rate of 4 percent?

Accepted Answer

A)  1.24 years 
B)  5.69 years 
C)  6.25 years 
D)  18.00 years

Question 19

Solving for Rates You invested $5,000 in the stock market one year ago. Today, the investment is valued at $5,500. What return did you earn? What return would you suffer next year for your investment to be valued at the original $5,000?

Accepted Answer

A)  10%, -9.09%, respectively 
B)  -10%, +9.09%, respectively 
C)  110%, -10%, respectively 
D)  110%, -9.09%, respectively

Question 20

Solving for Rates You invested $1,000 in the stock market one year ago. Today, the investment is valued at $1,250. What return did you earn? What return would you suffer next year for your investment to be valued at the original $1,000?

Accepted Answer

A)  +25%, -20%, respectively 
B)  -25%, +20%, respectively 
C)  125%, -25%, respectively 
D)  125%, -20%, respectively

Exam 4: Time Value of Money 1: Analyzing Single Cash Flows